The Wage That Meant Middle Class
By Louis Uchitelle
Whatever Senator Barack Obama meant by his less than artful remarks about small-town Pennsylvanians "bitter" over lost jobs, he certainly turned a lot of attention last week to the decline of the American worker, bitter or not.
The talk most often has been of shuttered factories, layoffs, outsourcing and other effects of globalization, especially in a state like Pennsylvania, which has lost tens of thousands of industrial jobs. But there is another way to look at blue-collar workers or their counterparts in the service sector.
Leaving aside for a moment those who have lost their jobs, what of those who still have them? Once upon a time, a large number earned at least $20 an hour, or its inflation-adjusted equivalent, and now so many of them don't.
The $20 hourly wage, introduced on a huge scale in the middle of the last century, allowed masses of Americans with no more than a high school education to rise to the middle class. It was a marker, of sorts. And it is on its way to extinction.
Americans greeted the loss with anger and protest when it first began to happen in big numbers in the late 1970s, particularly in the steel industry in Western Pennsylvania. But as layoffs persisted, in Pennsylvania and across the country, through the '80s and '90s and right up to today, the protests subsided and acquiescence set in.
Hourly workers had come a long way from the days when employers and unions negotiated a way for them to earn the prizes of the middle class - houses, cars, college educations for their children, comfortable retirements. Even now a residual of that golden age remains, notably in the auto industry. But here, too, wages are falling below the $20-an-hour threshold - $41,600 annually - that many experts consider the minimum income necessary to put a family of four into the middle class.
The nation's political leaders - Democrats and Republicans alike - have argued that education and training are a route back to middle-class wages for those who have fallen out. But the demand isn't sufficient to absorb all the workers that the leaders would educate. Even now, roughly 15 percent of college-educated workers find themselves in jobs for which they are overqualified, the Economic Policy Institute reports, and many of these jobs pay less than $20 an hour.
"People are mainly worried about having a job and only secondly what it pays and whether they are gaining ground," said Frank Levy, a labor economist at the Massachusetts Institute of Technology, trying to explain the absence of an outcry and a political debate in which the candidates do not quantify the decline. "If you aren't gaining ground," Mr. Levy added, "then you look for other ways to pay for consumption, going into debt or, until recently, refinancing your home."
Still, the erosion haunts the presidential campaign. Mr. Obama, competing against Hillary Rodham Clinton in the Pennsylvania primary to be held on Tuesday, touched this nerve in his description of small-town voters who "cling" to their guns and their religion in their resentment over lost jobs. It was a description that prompted John McCain, the Republican candidate, to label Mr. Obama an "elitist," and Mrs. Clinton to portray him as out of touch with small-town sentiment. But like Mr. Obama, neither spoke of dollars missing from paychecks, or of the disappearing $20-an-hour wage.
That basic wage blossomed first in the auto industry in 1948 and served, in effect, as a banner in the ideological struggle with the Soviet Union. As the news media frequently noted, salt-of-the-earth American workers were earning enough to pay for comforts that their counterparts behind the Iron Curtain could not afford.
As the years passed, unions succeeded in negotiating this basic wage not as an ultimate goal but as an early rung in their wage ladders. That was the union standard, particularly in heavy industries, and in the early postwar decades nonunion employers fell into line, spreading middle-class incomes broadly through the service sector.
"The most important model that rolled off the Detroit assembly lines in the 20th century," said Harley Shaiken, a labor economist at the University of California at Berkeley, "was the middle class for blue-collar workers."
The high point came in the 1970s, just as the United States was beginning to lose its controlling grip on the economies of the non-Communist world. Since then the percentage of people earning at least $20 an hour has eroded in every sector of the economy, falling last year to 18 percent of all hourly workers from 23 percent in 1979 - a gradual unwinding of the post-World War II gains.
The decline is greatest in manufacturing, where only 1.9 million hourly workers still earn that much. That's down nearly 60 percent since 1979, the Bureau of Labor Statistics reports.
The shrinkage is sometimes quite open. The Big Three automakers are currently buying out more than 25,000 employees who earn above $20 an hour, replacing many with new hires tied to a "second tier" wage scale that never quite reaches $20. A similar buyout last year removed 80,000 auto workers. Many were not replaced, but many were, with the new hires paid today at the non-middle-class scale, and with fewer benefits.
The United Auto Workers agreed to this arrangement, accepting management's argument that it must have labor cost relief to rebound and prosper. Whatever the justification, the new accord in effect abandoned the 1948 contract. That agreement is still hailed as historic. In contrast, the 2007 contract that reversed it is hardly recognized as a significant event in labor history. "It is significant," Mr. Shaiken insisted, referring to last year's contract. "The Big Three and the U.A.W. were the model for industrial America at its zenith."
This time the auto workers weren't first. They ratified a practice that had spread to tire makers, heavy-equipment manufacturers, parts plants, groceries, retailers and longshoremen, diluting older workers' resistance by preserving their status, while lowering earning power for new hires.
Two tiers is one tactic. Another is filling middle-income jobs with temporary workers earning less. Add outsourcing to the list, and the off-shoring of such middle-income work as computer programming and radiology. Then there are the manufacturers who close a union plant and shift production to a nonunion one, often in the South but also in the Midwest.
When Whirlpool, for example, acquired Maytag last year it closed a Maytag washing machine factory in Newton, Iowa, that had employed hundreds of workers at more than $20 an hour and shifted production to its plant in Clyde, Ohio, adding hundreds of workers at $17 an hour.
Put givebacks on the list as well. Tens of thousands of workers have accepted wage cuts pressed on them by embattled employers, cuts that in many cases pushed their wages below middle-class levels. Flight attendants are a notable example. And as each new group acquiesces, the standard for what constitutes an acceptable wage comes down in America.
"You can't have an economy heavily invested in tradable goods and services that is completely oblivious to global wages," said Ron Bloom, special assistant to the president of the United Steelworkers.
The decline is most significant in the data that the Bureau of Labor Statistics collects for the nation's hourly work force, which totals 76 million, or 52 percent of all workers, and ranges from managers and professionals to factory and construction workers to technicians, educators and sales people. The wages of many salaried workers show a similar trend, although the bureau does not convert their pay into hourly amounts.
The trend in the hourly work force is striking. Take only the peak years in each business cycle, starting in 1979. The proportion earning at least $20 an hour declined from 23 percent that year, to 20 percent in 1980, to 18 percent in 1989, and to 16 percent in 2000. Manufacturing was hit the hardest.
The current business cycle brought some relief. It reached its peak last year, before plunging into what now appears to be the opening months of a stiff recession. In 2007, before the plunge, the percentage of middle-income hourly workers earning at least $20 an hour had risen, to 18 percent. The improvement came mainly from a rising proportion of women in higher-end hourly work.
Wages also held up in the public sector. Strip out that sector, and only 16 percent of privately employed hourly workers took home at least $20 an hour, just fractionally above the 2000 level.